PATENT LAW

A patent is a grant of an exclusive monopoly for a limited time period from the federal government to an inventor. The theory behind patent law is that the opportunity to obtain such an exclusive monopoly encourages investment in research and development. 

To receive a patent, the inventor must reveal to the public information about the invention. In return, the inventor may exclude others from making, using, selling, or offering to sell in the United States the patented invention or from making, using, selling, or offering to sell a substantial portion of components that, if combined, would infringe the patent. In addition, federal law prohibits the importation to the United States of products made from any process covered by a U.S. patent. Patents are issued exclusively by the federal government. 

Article I, Section 8 of the U.S. Constitution provides: The Congress shall have power … To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries. States therefore may not issue patents. Patents are issued under the auspices of the federal Patent and Trademark Office (PTO), in accordance with the provisions of the federal Patent Act.1 In addition, Congress 1 35 U.S.C. §§ 1 et seq. Chapter 2: Protection of Intellectual Property Assets: Patent and Copyright Law 25 created the U.S. Court of Appeals for the Federal Circuit (CAFC) in 1982. The CAFC is a specialized appellate court with limited jurisdiction over certain types of legal issues, including patent law. 

All patent appeals are heard by this court, which has developed expertise in this area of the law, rather than by the 12 regular circuit courts. As a result, patent law is now much more uniform than it was in the past. Standards for Patent Issuance There are three kinds of patents in the United States: (1) utility patents; (2) design patents; and (3) plant patents. As Exhibit 2.3 indicates, utility patents are by far the most common. When people use the term “patent,” they usually are referring to a utility patent. Utility patents protect the function of articles or processes. Design patents protect the ornamental features of articles. Plant patents may be issued for asexually reproducible plants that are novel, nonobvious, and distinct. 

Because plant patents are such a narrow niche, our discussion focuses primarily on utility patents and secondarily on design patents. An inventor can have only one patent per invention. If the item involved incorporates two or more inventions, however, the inventor can receive separate utility patents for each invention. In Exhibit 2.1, for example, separate utility patents could be obtained for the floor brush and the motor. In addition, an inventor can obtain both design and utility patents on different aspects of a single item. Suppose a company invents a new kind of no-spill cup for children that is unusually effective at preventing spills and leaks and that has a unique and attractive shape. 

The company could obtain a utility patent on the no-spill lid and a design patent on the shape of the cup. Utility Patents Utility patents cover useful inventions that fall into one of five categories: processes (such as a gene-splicing procedure), machines, articles of manufacture (such as a tire or a chair),2 a composition of matter (such as a new chemical compound), or improvements upon existing ideas that fall into any one of these categories. Utility patents protect only processes or tangible products. Patents may not be used to protect expressions of ideas (that is the function of copyright law), nor may patent law be used to obtain a

monopoly on laws of nature, naturally occurring substances, mathematical formulas, or abstract ideas, for such a monopoly would stifle scientific inquiry and advancement. The distinction between man-made and naturally occurring organisms has important implications for the biotechnology industry in particular.

 In Diamond v. Chakrabarty, 3 decided in 1980, the Supreme Court determined that while naturally occurring microorganisms cannot be patented, man-made microorganisms may be. See Discussion Case 2.1. The PTO has since interpreted Chakrabarty as authorizing patents on higher forms of genetically engineered mammals, such as mice and rabbits. The United States tends to be more liberal on this issue than most countries. 

Man-made organisms patentable in the United States may well not receive patent protection elsewhere in the world. The categories of patentable subject matter can shift over time as courts respond to changing technology and circumstances. Recent significant changes involve the patentability of business methods (i.e., patents that pertain to a method of doing or conducting business). In a 1998 decision, State Street Bank & Trust Co. v. Signature Financial Group, Inc., 4 the CAFC held that business methods could be patented provided the method involved a practical application (i.e., produced a “useful, concrete and tangible” result). 

After State Street Bank, business method patent applications grew dramatically, though they are still only a small fraction of the total number of patent applications filed each year. In fiscal year 2008, the PTO received 9,563 business method patent applications and issued 1,643 patents.5 The issuance of business method patents has been very controversial, as many commentators feel that the PTO is issuing patents for obvious inventions. In particular, many argue that the PTO is issuing patents for ways of doing business on the Internet that are common in the non-Internet business world. 

They fear that the growth in business method patents will hamper the development of the Internet as a commercial medium. The State Street Bank decision has created problems as well as opportunities for businesses. Many businesses that had treated their business methods as trade secrets and had not attempted to patent them suddenly found themselves facing patent infringement claims from inventors who filed for business method patents long after the method had already been in use by others. 

Congress responded to this unexpected consequence in the American Inventors Protection Act of 1999,6 which created the “first inventor defense.” This defense allows a person who invented and used commercially a method of doing business at least one year before the date another person filed a business method patent application on it to continue using the method without infringing on any patent that might be granted.7 In 2008, the Federal Circuit issued a decision in In re Bilski,8 in which the court significantly reined in the scope of business method patents. The Bilski court held that the “useful, concrete and tangible” result test of State Street Bank was insufficient to judge patentability of business methods.

The inventors in Bilski had applied for a patent for a method of hedging certain commodity transactions. The PTO denied their application on the grounds that it lacked patentable subject matter. The inventors appealed the denial. The Federal Circuit, sitting en banc, affirmed the denial. The Federal Circuit stated that the test to be applied to determine the patentability of any process, including business methods, is whether the process: (1) is tied to a particular machine or apparatus, and (2) transforms a particular article into a different state or thing. This “machine-or-transformation test,” as it is known, has created its own questions about patentability of business methods, and the PTO and the lower courts are still determining how it applies in specific situations. The U.S. Supreme Court will hear oral argument in In re Bilski in November, 2009.

 So the future of business method patents is still uncertain as this edition goes to press. A utility patent gives its owner a monopoly of limited duration in an invention in return for full public disclosure of the invention’s details (so that the public may learn from it). Patents currently have a term of 20 years from the date the application was filed. This term can be extended if the PTO fails to grant a patent within three years after filing because of administrative delay. Patent terms cannot otherwise be extended or renewed, however; and, once the term has expired, all members of the public (including competitors) are free to make or use the invention as they wish. 

An inventor will not receive a patent merely because he has invented something. Rather, the inventor must show that the invention is worthy of a patent. The Patent Act requires that in order for a utility patent to issue, the invention must be: (1) novel; (2) nonobvious; and (3) useful. Novelty is covered in Section 102 of the Patent Act. Although Section 102 has numerous provisions covering a variety of types of circumstances, two are particularly important. Section 102(a) provides that a patent must be denied: if the invention was known or used by others in this country or patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for a patent …. 

The focus in Section 102(a) is on the actions of persons other than the applicant prior to the date that the applicant made the invention. Prior to that date, did other persons cause the invention to be known or used in the United States? Did they cause it to be patented or make it the subject of a printed publication anywhere else in the world? The policy behind Section 102(a) is to prevent a second inventor from obtaining a patent if a previous inventor has already placed the invention in the public domain before the second inventor made his invention. Section 102(b) provides that a patent must be denied: if the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of application for patent in the United States …. Section 102(b) focuses on the actions of the applicant and others more than one year before the application was filed. 

Essentially, once one of the listed events has occurred, the inventor has one year in which to file an application for patent, or the inventor loses the right to do so. There are several policy reasons behind this provision. First, it ensures that inventions in the public domain for one year remain there. Second, it allows the inventor one year in which to test market reaction before going to the considerable expense of filing for a patent. Third, it prevents the inventor from marketing the product for several years before applying for a patent in an effort to extend the effective patent time. 

See Discussion Case 2.2. The nonobviousness standard asks whether the invention would have been obvious to someone skilled in the particular field as of the date of invention. If so, the invention is not patentable.

The usefulness standard requires that there be a current, significant, beneficial use for the invention. This is not a particularly high bar, and most inventions have no problem in meeting this requirement. Design Patents Design patents protect the ornamental features of an article of manufacture.

 As you can imagine, design patents are of great importance to many manufacturers, particularly manufacturers of consumer goods. Many goods—such as athletic shoes, coffeemakers, or chairs—may be virtually indistinguishable from each other except for their design, which then becomes critical to the marketing function. To receive a design patent, the inventor must show that her design is: (1) novel; (2) nonobvious; and (3) ornamental. With a few exceptions, the novelty requirement applies to design patents just as it does to utility patents. 

The test for nonobviousness of design patents is whether a professional designer of ordinary skill, viewing the overall appearance of the design as compared to prior designs, would consider the new design obvious. The ornamentality standard requires that the design be primarily ornamental and not dictated by functional considerations. If there are a variety of ways in which the article could be designed and still perform its function, the design is most likely ornamental and not functional.

 If the design affects the invention’s function or performance, however, it must be protected, if at all, through a utility patent, not a design patent. Design patents are valid for a term of 14 years from the date of patent issuance—a much shorter term than that granted to utility patents. Ownership of Patents Under U.S. law, the first to invent is the only person who can file for and obtain a patent. In virtually every other country of the world, however, the first to file is entitled to the patent. Very often, employees create inventions while at work. 

This situation raises two issues: (1) Who owns the invention—the inventor or the employer? and (2) Who may file for the patent—the inventor or the employer? If the employee creates the invention in the context of fulfilling his specific job duties (i.e., the employee was “hired to invent”), the invention belongs to the employer and the employee is obligated to assign all rights to the invention to the employer. It is best, from the employer’s perspective, to have a specific employment agreement in place providing that the employee will make such an assignment.

 In the absence of an explicit agreement, the common law will reach the same result. If the employee does not create the invention as part of his official job duties but nonetheless invents something closely related to his duties or uses company resources in doing so, the employee will “own” the invention, but the employer will have “shop rights” in the invention. Shop rights are an irrevocable, nontransferable, royalty-free license to use the invention. 

The theory behind shop rights is that the employer, whose resources contributed to the invention, should have the right to use the invention in its business, although the employee retains the right to exploit the invention for all other purposes. Employers generally are not satisfied with obtaining shop rights, however. 

Rather, they want to own the invention. Thus, employers often use “invention assignment agreements,” in which the employee agrees in advance to assign all rights in an invention to the employer. (Invention assignment agreements are discussed in more detail in Chapter 3.) Ownership of the invention does not resolve the question of who can apply for the patent, however. 

Recall that under U.S. law, only the inventor (i.e., the person who conceived of the invention) is entitled to apply for a patent. Thus, even if the employer has an invention assignment agreement transferring ownership of the invention to it, the inventor must still file for the patent; ownership of the patent can then be assigned to the employer by Chapter 2: Protection of Intellectual Property Assets: Patent and Copyright Law 29 the inventor.

 Thus, the invention assignment agreement should contain a provision obligating the employee/inventor to cooperate in the application for the patent. Patent Application Procedures Applications for patents are made to the PTO in Washington, D.C. The PTO will examine the application and, if all of the statutory standards have been met, will issue a patent. Inventors may represent themselves before the PTO.

 As a practical matter, however, because of the complexity and technicality of the documents required, it is usually advisable to seek the services of a patent agent or patent attorney who is skilled in drafting an application that is broad enough to protect the invention yet narrow enough to pass the scrutiny of the PTO examiner. Both patent lawyers and patent agents are individuals licensed to practice in patent cases before the PTO. 

The major distinction between the two is that patent agents cannot represent clients outside the PTO (for example, in litigation resulting from patent infringement), while patent lawyers, of course, can. Both patent lawyers and patent agents must have a degree in a technical or scientific field, such as engineering or physics, and both must pass a PTO exam that tests knowledge of patent laws and rules and the ability to write a patent claim. The process of obtaining a patent from the PTO is known as a prosecution. 

The application must describe the invention in detail and include diagrams or illustrations. The Patent Act requires that patent applicants fully disclose their inventions to the public as part of the “price” of obtaining a patent. The patent applicant is required to describe how to make and use the invention with sufficient clarity, precision, and detail to enable a person skilled in the relevant art to make and use it without undue experimentation. 

Failure to do so will result in either denial of the patent or, if the patent has already issued, invalidation of the patent. The application must set forth the claims—statements that describe the invention in a very formal and stylized manner and that articulate the basis for the monopoly that is to be granted to the inventor. Typically, a number of negotiations take place between the patent examiner and the patent lawyer or agent, which often result in the patent application being rewritten to result in a narrower monopoly being granted to the inventor. 

On average, it takes eighteen months to two years to obtain a patent, although the process can take much longer for complex or disputed patents. Before filing an application, the applicant should conduct a prior art search. “Prior art” refers to any printed publication, prior patent, or other document, or prior invention that references or makes use of the invention that is the subject of the patent application. 

The PTO may find that such prior art renders the applicant’s invention obvious or nonnovel, making the issuance of a patent improper. A careful search for prior art helps the applicant to avoid the expense of filing an application that the PTO is unlikely to grant and helps the applicant to prepare responses in advance to issues likely to be raised by the PTO examiner. The applicant must disclose to the PTO all of the prior art of which it is aware. There are a number of professional firms that specialize in searching for prior art; there are a number of online databases available as well. 

Because the consequences of an improper prior art search can be both expensive and time-consuming, it is wise to seek professional assistance in this area. The PTO examiner also conducts a search for prior art in the course of evaluating the application. The filing fee for a patent is relatively modest—typically, $330.9 Of course, the filing fee is only one small part of the entire process. The PTO charges additional examination and maintenance fees as well. The largest expense the applicant is likely to face, however,

Patentees do not automatically have a right to “work” their inventions in every instance, however. A patent does not grant the inventor the right to make, use, or sell the invention; rather, it grants the patentee the right to exclude others from doing so. 

Suppose that Inventor A holds a patent on a new type of widget that will revolutionize the widget-using industries. To make the widget, however, Inventor A must use a specific manufacturing process that has already been patented by Inventor B. Inventor A therefore cannot manufacture her widgets without infringing upon Inventor B’s patent. Inventor B’s patent is known as a blocking patent, and it will have the effect of preventing Inventor A from commercializing her widget invention. Inventor A will have the right to prevent others from making her patented widget, but will be unable to make the widget herself unless she is able to negotiate a license with Inventor B for the use of the patented manufacturing method.